AEON Biopharma Inc

Current report

We are subject to various risks and uncertainties in the course of our business. You should carefully consider the risks and uncertainties described below and the other information in this Quarterly Report on Form 10-Q (this “Report”) before making an investment in our Class A common stock, par value $0.0001 per share (“Common Stock”). Our business, financial condition, results of operations, or prospects could be materially and adversely affected if any of these risks occur, and as a result, the market price of our common stock could decline and you could lose all or part of your investment. This Report also contains forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements.” Our actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of certain factors, including those set forth below.

Current report

Summary of Principal Risks Associated with Our Business

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Risks Related to Our Business Operations and Financial Position

Current report

We have a limited operating history and have incurred significant losses since our inception and anticipate thatwe will continue to incur losses for the foreseeable future. Ifwe ever achieve profitability, wemay not be able to sustain it.

Current report

Weare a clinical stage biopharmaceutical company with a limited operating history. Pharmaceutical product development is a highly speculative undertaking andinvolvesa substantial degree of risk. Old AEON was originally incorporated in 2012 but did not begin focusing its efforts and financial resources on the clinical development and regulatory approvalof ABP-450 fortherapeutic indications until 2019. The operating history upon which investors must evaluateour business and prospects is limited. Consequently, anypredictions about our future success, performance or viabilitymaynot be as accurate as they could be if we had a longer operating history or a history of commercial operations. In addition, as an organization, wehave limited experience andhavenot yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently encountered by companies in the biopharmaceutical market. Todate, wehavenot obtainedany regulatory approvalsfor ABP-450 or generatedany revenue from product sales relating to ABP-450. On May 16, 2024, we announced the discontinuation of our Phase 2 double blind study of ABP-450 in the treatment of episodic migraine and chronic migraine, which had previously completed enrollment and dosing of patients, and ceased enrollment and dosing of patients in our open label extension study related to such study, in order to implement certain cash preservation measures while the Company continues to evaluate its strategic options. On July 9, 2024, we announced a strategic reprioritization to seek regulatory approvalof ABP-450 as a biosimilar product in the United States through submission of a Biologics License Application, or BLA, under Section 351(k) of the Public Health Service Act, or a Section 351(k) BLA, using AbbVie Inc.’s product Botox as the reference product, for all of the indications forwhich Botox isapproved, other than the cosmetic uses (for which we do not hold development or commercialization rights). Wealso announced our proposed plans to initiate a single pivotal clinical

Current report

study in patients with cervical dystoniafor ABP-450 with thegoalof using the biosimilar pathway, which we plan to discuss during a meeting with the FDAthat is currently scheduledforthe third quarter of 2024.

Current report

Because wehavenot yet received regulatory approvals, we are not permitted to market ABP-450 for anyuse in the United States or inany other territory, and as such, wehavenot generatedany revenue from sales of ABP-450 todate. Wehave recorded losses from operations of $29.6 million, income of $29.6 million and loss of $48.4 millionforthe periods January 1, 2023 to July 21, 2023 (Predecessor), July 22, 2023 to December 31, 2023 (Successor) and for the year ended December 31, 2022, respectively; and we have net losses of $60.7 million, income of $24.0 million and loss of $52.6 millionforthe periods January 1, 2023 to July 21, 2023 (Predecessor), July 22, 2023 to December 31, 2023 (Successor) andforthe year ended December 31, 2022, respectively. Losses from operations, excluding the impact of changes in fair value of the contingent consideration, were $7.8 million, $18.1 million, $14.0 million and $27.0 million for the three and six months ended June 30, 2024 (Successor) and June 30, 2023 (Predecessor), respectively. Consolidated net income (loss) were income of $164.1 million and $46.1 million for the three and six months ended June 30, 2024 (Successor), respectively, and losses of $15.4 million and $33.0 million for the three and six months ended June 30, 2023 (Predecessor), respectively. As of June 30, 2024, we had $3.4 million in cash and cash equivalents. As a result of our ongoing losses, as of June 30, 2024 (Successor), we had an accumulated deficit of $427.5 million. Weexpect to continue to incur lossesforthe foreseeable future, and we anticipate these losses will increase as we continue to seek regulatory approvalfor, and begin to commercialize, ABP- 450, ifapproved. Wemay encounter unforeseen expenses, difficulties, complications, delays and other unknown factors thatmay adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growthof our expenses and our ability to generate revenues. Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders’ equity (deficit) and working capital. Because of the numerous risks and uncertainties associated with drug development, we are unable to accurately predict the timing or amount of increased expenses, or when, if at all, we will be able to achieve profitability. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Our prior losses, combined with expected future losses, may adversely affect the market price of common stock and our ability to raise capital and continue operations.

Current report

Our management has concluded that uncertainties around our ability to raise additional capital raise substantial doubt about our ability to continue as a going concern. Wewill require additional financing to fund our future operations. Any failure to obtain additional capital when needed on acceptable terms, or at all, could force us todelay, limit, reduce or terminate our operations.

Current report

Wehave concluded that we do nothave sufficient cash to fund our operations and to meet our obligations as they become due within one year from the date that our consolidated financial statements are issued and as a result, there is substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is an issue raised as a result of ongoing operating losses and a lack of financing commitments to meet cash requirements, and is subject to our ability to generate a profit or obtain appropriate financing from outside sources, including obtaining additional funding from thesaleof our securities or obtaining loans from third parties where possible. Wewill need to raise additional capital to fund our operations. Wecannot assureyou that we will beableto raise additional capital on commercially reasonable terms orat all. The perception that wemaynot beableto continue as a going concernmay materially limit our ability to raise additional funds through the issuance of new debt or equity securities or otherwise and no assurance can be given that sufficient funding will be available when needed to allow us to continue as a going concern. This perception may also make it more difficult to operate our business due to concerns about our ability to meet our contractual obligations. If we cannot continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our financial statements, and it is likely that our stockholders may lose some or all of their investment in us.

Current report

We expect that we will continue to expend substantial resources for the foreseeable future in order to complete development of and seek regulatory approval for ABP-450 as a biosimilar to Botox, identify future potential therapeutic applications for ABP-450 and establish sales and marketing capabilities to commercialize ABP-450 across any approved indications.

Current report

Weexpect tohave sufficient cash to fund our operating plan into the fourth quarter of 2024. Wehave based these estimates, however, on assumptions that may prove to be wrong, and we could spend our available capital resources much faster than we currently expect or require more capital to fund our operations than we currently expect. Our future capital requirements depend on many factors, including:

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•the timing of, and the costs involvedin, obtaining regulatory approvalsfor ABP-450;

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•the scope, progress, results and costs of researching and developing ABP-450, and conducting preclinical and clinical studies, includingany studies required by the FDAto support submission of a Section 351(k) BLA;

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•the cost of commercialization activities if ABP-450 isapproved forsale, including marketing, sales and distribution costs;

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•costs under our third-party manufacturing and supply arrangementsfor ABP-450 andany products we commercialize;

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•the degree and rate of market acceptance of ABP-450, ifapproved, orany future approved products;

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•the emergence, approval, availability, perceived advantages, relative cost, relative safety andrelative efficacy of alternative and competing products;

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•costs associated with any acquisition or in-license of products and product candidates, technologies or businesses, and the terms and timing of any strategic collaboration or other arrangement;

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•the terms ofany conversion of the senior secured convertible notes in the principal amount of $15.0 million (each a “Convertible Note” andtogether, the “Convertible Notes”), pursuant to a subscription agreement (the “Subscription Agreement”), dated as of March 19, 2024, with Daewoong Pharmaceutical Co. Ltd. (“Daewoong”), into shares of common stock, subject to certain conditions and limitations set forth in each Convertible Note

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•the timing and terms of any liquidated damages cash payments under the separate termination agreements, dated as of March 18, 2024 (each, a “FPA Termination Agreement” and together, the “FPA Termination Agreements”), with each of ACM ARRT J LLC (“ACM”), and Polar Multi-Strategy Master Fund (“Polar”) (each of ACM and Polar, individually, a “Seller”, and together, the “Sellers”), terminating their respective Forward Purchase Agreements with us, dated as of June 29, 2023, for an OTC Equity Prepaid Transaction (each, a “Forward Purchase Agreement”, and together, the “Forward Purchase Agreements”), which in certain circumstances may require aggregate payments of up to $3.0 million by us to the Sellers under the FPA Termination Agreements; and

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•costs of operating as a public company.

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If we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, wemay haveto relinquish certain valuable rights to our product candidate(s), technologies, future revenue streams or research programs ormay haveto grant licenses on terms thatmaynot befavorabletous. If we raise additional capital through public or private equity offerings or offerings of securities convertible into ourequity, the ownership interest of stockholders will be diluted and the terms ofany such securitiesmay havea preference overour common stock. Debt financing, receivables financing androyalty financingmay alsobe coupled with an equity component, such as warrants to purchase our capital stock, which could also result in dilution of our existing stockholders’ ownership, and such dilutionmaybe material.

Current report

Furthermore, if we raise additional capital through debt financing, we will have increased fixed payment obligations and may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt or making capital expenditures to meet specified financial ratios, and other operational restrictions, any of which could restrict our ability to commercialize ABP-450 or to operate as a business and may result in liens being placed on our assets. If we were to default on any of our indebtedness, we could lose such assets. Additional fundingmaynot beavailableon acceptable terms, or at all. The global credit and financial markets have experienced volatility and disruptions recently, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, and uncertainty about economic stability. If the equity and credit markets deteriorate, itmay makeany necessary debt or equity financing more difficult, more costly or more dilutive.

Current report

Our future success currently depends entirely on the successful and timely regulatory approval and commercialization of our only product candidate, ABP-450. The development and commercialization of pharmaceutical products is subject to extensive regulation, andwemay not obtain regulatory approvals for ABP-450 on a timely basis or at all.

Current report

The clinical development, manufacturing, labeling, storage, record-keeping, advertising, promotion, import, export, marketing and distribution of biological products, including ABP-450, are subject to extensive regulation by the FDAin the U.S. and by comparable foreign regulatory authorities in foreign markets. Regulatory approvalof biologics in the United States requires the submission of a BLA to the FDA. A BLA must be supported by extensive clinical and preclinical data, as well as extensive information regarding pharmacology, chemistry, manufacturing and controls demonstrating thesafety, purity and potency of the biological productforits intended uses. FDA approvalof a BLA is not guaranteed, and the review andapproval process is an expensive and uncertain process thatmay take several years. The FDAalsohas substantial discretion in theapproval process, including the ability todelay, limit or deny approvalof a product candidate for many reasons. Despite the time and expense invested in clinical development of product candidates,

Current report

regulatory approvalof a product candidate is never guaranteed. Of the large number of drugs in development, only a small percentage successfully complete the FDAor foreign regulatory approval processes and are commercialized.

Current report

Prior to obtaining approvalto commercializeany product candidate in the United States orabroad, we must demonstrate with substantial evidence from well-controlled clinical trials, and to the satisfaction of the FDAor comparable foreign regulatory authorities, that our product candidate, ABP-450, is safe and effectiveforits intended uses and in the case of biological products in the U.S., such as ABP-450, that such product candidate is safe, pure and potentforits intended uses. Results from preclinical studies and clinical trials can be interpreted in different ways. Even if we believe that the preclinical or clinical dataforour product candidates, including ABP-450, are promising, such datamaynot be sufficient to support approvalfor further development, manufacturing or commercialization of our product candidates by the FDAand other regulatory authorities. The FDAor other regulatory authoritiesmay also require us to conduct additional preclinical studies or clinical trialsforour product candidates either prior to orpost-approval, or itmay object to elements of our clinical development program, requiring their alteration. The number and types of preclinical studies and clinical studies that will be required for BLA approval varies depending on the product candidate, the disease or the condition that the product candidate is designed to treat and the regulations applicable toany particular product candidate.

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The FDA and other regulatory authorities can delay, limit or deny approval of a product candidate formany reasons, including the following:

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•such authoritiesmay disagree with the design or execution of our clinical trials;

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•negative or ambiguous results from our clinical trials or resultsmaynot meet the level of statistical significance or persuasiveness required by the FDAor comparable foreign regulatory agenciesfor approval

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•the population studied in the clinical trialmaynot be sufficiently broad or representative to assure safety in the full populationfor which we seek approval;

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•serious and unexpected drug-related side effects may be experienced by participants in our clinical trials or by individuals using products similar to our product candidates;

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•the populations weevaluatein our the clinical trialsmaynot be sufficiently broad or representative to assure safety in the full populationfor which we seek approval;

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•we may be unable to demonstrate that a product candidate is safe, pure, potent, or effective for its intended uses, that such product candidate’s clinical and other benefits outweigh its safety risks, or that such product candidate is biosimilar to a reference product;

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•such authoritiesmaynot agree that the data collected from clinical trials of our product candidates are acceptable or sufficient to support the submission of a Section 351(k) BLA or other submission or to obtain regulatory approvalin the U.S. orelsewhere, and such authoritiesmay impose requirementsfor additional preclinical studies or clinical trials;

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•such authoritiesmay disagree with us regarding the formulation, labeling and/or the product specifications of our product candidates;

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•approvalmaybe granted onlyfor indications that are significantly more limited than those sought byus, and/ormay include significant restrictions on distribution and use;

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•such authoritiesmay find deficiencies in the manufacturing processes or facilities of the third-party manufacturers with which we contractfor clinical and commercial supplies; or

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•the FDA and other regulatory agencies may change their approval policies or adopt new regulations.

Current report

If ABP-450 fails to demonstrate the requisite safety, purity, potency or biosimilarity in our planned clinical studies or does not gain approval, our business and results of operations will be materially and adversely harmed.

Previous report

We are subject to various risks and uncertainties in the course of our business. For a discussion of such risks and uncertainties, please see the section in our Annual Report Form 10-K in the section titled “Risk Factors,” filed with the SEC on May 14, 2024 (as amended). There have been no material changes to the risk factors disclosed therein.